31. Provisions on Pymt of Adv. Tax

7/23/2019 31. Provisions on Pymt of Adv. Tax

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[As amended by Finance (No. 2) Act, 2014]

PROVISIONS RELATING TO PAYMENT OF ADVANCE TAX

Liability to pay advance taxAs per section 208, every person whose estimated tax liability for the year is Rs. 10,000or more, shall pay his tax in advance, in the form of advancetax.In this part you can

gain knowledge on various provisions relating to payment of advance tax by a taxpayer.

Person not liable to pay advance tax

As discussed above, every person whose estimated tax liability for the year is Rs. 10,000

or more is liable to pay advance tax. However, following persons are not liable to payadvance tax even if their tax liability is Rs. 10,000 or more:

Person not liable to pay advance tax

A taxpayer opting for the presumptive taxation scheme of section 44AD will notbe liable to pay advance tax in respect of business for which the presumptive

taxation scheme of section 44AD is adopted.

A resident senior citizen (i.e., an individual of the age of 60 years or above during

the relevant financial year) not having any income from business or profession isnot liable to pay advance tax.

Illustration

Mr. Kumar is running a provision store. The turnover of the store for the financial year

2014-15 amounted to Rs. 84,00,000. He wants to declare income under section 44AD at

8% of the turnover. He does not have any other source of income. Will he be liable to pay

advance tax?

**

Mr. Kumar satisfies the criteria of section 44AD in respect of provision store business

and, hence, he can adopt the provisions of section 44AD and declare income at 8% of the

turnover.

A taxpayer opting for the presumptive taxation scheme of section 44AD will not be liableto pay advance tax in respect of business covered under section 44AD. Thus, if Mr.Kumar adopts the provisions of section 44AD, he will not be liable to pay advance tax in

respect of income generated from provision store business.

Illustration

Mr. Rajat (age 29 years) is running a provision store. The turnover of the store for the

financial year 2014-15 amounted to Rs. 84,00,000. He has not adopted the provisions of

section 44AD and has maintained the books of account of the store. The accounts

revealed a net profit of Rs. 5,25,200. Will he be liable to pay advance tax?

**


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In this case Mr. Rajat has not adopted the provisions of section 44AD and, hence, he will

be liable to pay advance tax in respect of income generated from provision store businessif his estimated tax liability for the financial year comes out to Rs. 10,000 or more

The taxable income of Mr. Rajat is Rs. 5,25,200. Tax on Rs. 5,25,200 will be Rs. 30,941(*) which is more than Rs. 10,000, hence, Mr. Rajat will be liable to pay advance tax.

(*) The normal tax rates for the financial year 2014-15 applicable to an individual below

the age of 60 years are as follows:

Nil up to income of Rs. 2,50,000

10% for income above Rs. 2,50,000 but up to Rs. 5,00,000


30% for income above Rs. 10,00,000.

Apart from above, education cess at 2% and secondary and higher education cess at 1%will be levied on the amount of tax. Surcharge at 10% of income-tax shall also be levied

if net income during the year exceeds Rs. 1 crore (subject to marginal relief)

Illustration

Mr. Vipul (age 39 years) is running a medical store. The turnover of the store for the

financial year 2014-15 amounted to Rs. 40,00,000. He has not adopted the provisions of

section 44AD and has maintained the regular books of account of the store as per the

provisions of section 44AA. The accounts revealed a net profit of Rs. 2,84,000. Will hebe liable to pay advance tax?

**

In this case, Mr. Vipul has not adopted the provisions of section 44AD and, hence, he

will be liable to pay advance tax in respect of income generated from medical storebusiness if his estimated tax liability for the financial year comes out Rs. 10,000 or more.

The taxable income of Mr. Vipul is Rs. 2,84,000. Tax on Rs. 2,84,000 will be Rs. 1,442

(*) which is less than Rs. 10,000, hence, Mr. Vipul is not liable to pay advance tax.



Nil upto income of Rs. 2,50,000

10% for income above Rs. 2,50,000 but upto Rs. 5,00,000



However in case of taxpayer, being an Individual resident in India, rebate under section

87A of Rs. 2,000 or 100% of tax, whichever is lower, would be provided if his total

income does not exceed Rs. 5,00,000.


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Apart from above, education cess at 2% and secondary and higher education cess @ 1%

will be levied on the amount of tax.

Due dates for payment of advance tax

Advance tax is to be paid in different instalments. The due dates for payment of differentinstalments of advance tax are as follows:

Status By 15th June By 15th Sept. By 15th Dec. By 15th March

Non-corporatetaxpayers

Nil Up to 30% ofadvance tax

Up to 60% ofadvance tax

Up to 100% ofadvance tax

Corporate

taxpayers

Up to 15% of

advance tax

Up to 45% of

advance tax

Up to 75% of

advance tax

Up to 100% of

advance tax

Note 1: Any tax paid till 31st March will be treated as advance tax.

Note 2: If the last day for payment of any instalment of advance tax is a day on which the

banks are closed, then the taxpayer should pay the advance tax on the immediately

following working day [Circular No. 676, dated 14-1-1994].

Illustration

Mr. Kumar is a doctor. His estimated tax liability for the financial year 2014-15

amounted to Rs. 1,00,000. By which dates he should pay advance tax and how much?

**

If the estimated tax liability of the taxpayer is Rs. 10,000 or more, then he has to

discharge his tax liability in the form of advance tax. Advance tax is to be paid in

different instalments. The due dates for payment of different instalments of advance tax

in case of a non-corporate taxpayer are as follows:

Status By 15th June By 15th Sept. By 15th Dec. By 15th M arch

Non-corporate

taxpayers

Nil Up to 30% of

advance tax

Up to 60% of

advance tax

Up to 100% of

advance tax

Considering the above due dates, the advance tax to be paid by Mr. Kumar on differentdates will be as follows:

His first instalment of advance tax will fall due on 15th September, 2014. His

estimated tax liability for the year is Rs. 1,00,000. By 15th September, he should


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pay 30% of his tax liability in advance, hence, he should pay Rs. 30,000 on

account of advance tax by 15th September, 2014.

His second instalment of advance tax will fall due on 15th December, 2014. His

estimated tax liability for the year is Rs. 1,00,000. By 15th December, he shouldpay 60% of his liability in advance, i.e., Rs. 60,000. Assuming that he has already

paid Rs. 30,000 as advance tax by 15th September, he should pay balance of Rs.

30,000 on account of advance tax by 15th December, 2014. Thus, total paymentof advance tax till 15th December will amount to Rs. 60,000.

His third and final instalment of advance tax will fall due on 15th March, 2015.

His estimated tax liability for the year is Rs. 1,00,000. By 15th March, he should

pay 100% of his liability in advance, i.e., Rs. 1,00,000. Assuming that he hasalready paid Rs. 60,000 as advance tax till 15th December, he should pay balanceof Rs. 40,000 on account of advance tax by 15th March, 2015. Thus, total

payment of advance tax till 15th March, 2014 will amount to Rs. 1,00,000.Mode of payment of advance tax

As per Rule 125 of the Income-tax Rules, 1962 a corporate taxpayer (i.e., a company)

shall pay taxes through the electronic payment mode using the internet banking facility ofthe authorised banks.

Taxpayers other than a company, who are required to get their accounts audited, shall pay

taxes through the electronic payment mode using the internet banking facility of the

authorised banks.

Any other taxpayer can pay tax either by electronic mode or by physical mode i.e. bydepositing the challan at the receiving bank.

Payment of advance tax

Advance tax can be paid by the taxpayer either on his own account or in pursuance of an

order of the Assessing Officer.

The taxpayer who is liable to pay advance tax is required to estimate his current incomeand pay advance tax on his own account. In such a case, he is not required to submit any

estimate or statement of income to the tax authorities.

After making payment of first or second instalment of advance tax (as the case may be),

if there is a change in the tax liability, then the taxpayer can revise the quantum of

advance tax in the remaining instalment(s) and pay the tax as per revised estimates.

Tax can be computed on the current income (estimated by the taxpayer) at the rates in

force during the financial year. From the tax so computed, tax deducted or collected at

source will be deducted and the balance tax payable will be used to compute the advancetax liability. Also, relief of tax allowed under section 90 or section 90A or any deduction

under section 91 or any tax credit allowed to be set off as per section 115JAA or section

115JD shall also be deducted while computing the advance tax liability.


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Illustration

Mr. Raja is an architect. His estimated tax liability for the year amounts to Rs. 1,00,000.

He has paid advance tax of Rs. 30,000 by 15th September. In the month of November

one of his clients paid fee of Rs. 1,80,000 after deducting tax at source of Rs. 20,000(Such fees of Rs. 1,80,000 was considered at earlier occasion for estimating the tax

liability of taxpayer). In this case how much of advance tax he is required to pay in theremaining instalments?

**

If the estimated tax liability of the taxpayer is Rs. 10,000 or more, then he has todischarge his tax liability in the form of advance tax. Advance tax is to be paid in


in case of non-corporate taxpayers are as follows:


Non-corporate

taxpayers

Nil Up to 30% of

advance tax

Up to 60% of

advance tax

Up to 100% of

advance tax

Considering the above dates, Mr. Raja has to pay 30% of his estimated tax liability by15th September. Hence, he has to pay Rs. 30,000 on account of advance tax by 15th

September.

While computing the advance tax liability, the taxpayer can deduct the tax at source fromhis income. In this case, at the time of estimate of first instalment there was no TDScredit with Mr. Raja. His estimated tax liability without TDS amounted to Rs. 1,00,000.

In the month of November he received Rs. 1,80,000 after deduction of tax of Rs. 20,000,

hence, he got a TDS credit of Rs. 20,000. His tax liability after granting of credit of TDSwill come to Rs. 80,000.

In second instalment, i.e., by 15th December he should pay up to 60% of his revised taxliability. Thus, he should pay up to Rs. 48,000 (i.e., 60% of Rs. 80,000) by 15th

December. He has already paid Rs. 30,000 by 15th September and, hence, he should pay

balance of Rs. 18,000 by 15th December.

In third instalment, i.e., by 15th March he should pay 100% of his estimated tax liability.Thus, he should pay Rs. 80,000 by 15th March. He has already paid Rs. 48,000 till 15th

December and, hence, he should pay balance of Rs. 32,000 by 15th March (i.e., Rs.

80,000 Rs. 48,000).

Illustration

Mr. Rana is an engineer. His estimated tax liability for the year amounts to Rs. 2,00,000.He has paid advance tax of Rs. 60,000 by 15th September. In the month of November he

got a contract from a multinational company. After incorporating the receipts of the new


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contract, his revised tax liability for the year amounts to Rs. 3,00,000. In this case, how

much advance tax he is required to pay in each instalment?

**

If the estimated tax liability of the taxpayer is Rs. 10,000 or more, then he has todischarge his tax liability in the form of advance tax. Advance tax is to be paid in


in case of a non-corporate taxpayer are as follows:


Non-corporate

taxpayers

Nil Up to 30% of

advance tax

Up to 60% of

advance tax

Up to 100% of

advance tax

Considering the above dates, Mr. Rana has to pay 30% of his estimated tax liability by15th September. Hence, he has to pay Rs. 60,000 on account of advance tax by 15th

September (in September he was not aware of the contract and, hence, Rs. 60,000 will be

payable in first installment of advance tax liability).

After making payment of first/second instalment of advance tax, if there is a change in

the tax liability, the taxpayer can revise the quantum of advance tax in the remaininginstalment(s) and pay the tax as per revised estimate.

In this case, after payment of first instalment, he got the contract from the multinational

company and his revised estimated tax liability came to Rs. 3,00,000, hence, he has topay advance tax considering the revised liability of Rs. 3,00,000

In second instalment, i.e., by 15th December, he should pay up to 60% of his revisedliability. Thus, he should pay up to Rs. 1,80,000 (i.e., 60% of Rs. 3,00,000) by 15th

December. He has already paid Rs. 60,000 by 15th September and, hence, he should pay

balance of Rs. 1,20,000 by 15th December.

In third instalment, i.e., by 15th March he should pay 100% of his estimated tax liability.Thus, he should pay up to Rs. 3,00,000 by 15th March. He has already paid Rs. 1,80,000till 15th December and, hence, he should pay balance of Rs. 1,20,000 by 15th March (i.e.,

Rs. 3,00,000 Rs. 1,80,000).

Payment of advance tax in pursuance of an order of the Assessing OfficerIf taxpayer fails to pay advance tax (or advance tax paid is lower than the requiredamount) and he has already been assessed by way of regular assessment in respect of the

total income of any previous year, then the Assessing Officer may pass an order under

section 210(3) requiring him to pay advance tax on his current yearsincome (specifying

the amount of instalments in which tax should be paid). Such an order may be passedduring the financial year, but not later than the last day of February.


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On receipt of the notice from the Assessing Officer to pay advance tax, if the taxpayers

estimate is lower than the estimate of the Assessing Officer, then the taxpayer can submithis own estimate of current income/advance tax and pay tax accordingly. In such a case,

he has to send intimation in Form No. 28A to the Assessing Officer.Alternatively, if the advance tax on current income as per own estimate of the taxpayer is

likely to be higher than the amount estimated by the Assessing Officer, the taxpayer shallpay such higher amount as advance tax in accordance with his own calculation. In such a

case, no intimation to the Assessing Officer is required.

The Assessing Officer can revise his order issued to the taxpayer to pay advance tax (as

discussed above) under section 210(4). Such revision can be done, if subsequent to the

passing of an order to pay advance tax but before 1stMarch of the relevant financial year

a return of income in respect of any later year has been furnished by the taxpayer or any

assessment for any later year has been completed at a higher figure. On receipt of such

order, the procedure to be followed by the taxpayer will be same as discussed earlier.

Illustration

Compute the amount of advance tax to be paid by Mr. Raja (age 32 years) from thefollowing details provided by him (for the year 2014-15):

Taxable business income of Rs. 3,84,000.

Interest on debenture Rs. 9,000 (after deduction tax at source of Rs. 1,000).

Investment in NSC during the year Rs. 80,000.

Investment in PPF Rs. 20,000.

**Computation of taxable income and tax liability of Mr. Raja for the year 2014-15 :

Particulars Rs.

Profits and gains of business or profession

Taxable income from business

3,84,000

Income from other source

Debenture interest (Rs. 9,000 net interest + TDS of Rs. 1,000)

10,000

Gross total income 3,94,000

Less: Deduction under section 80C (NSC and PPF) 1,00,000

Total Income (i.e. Taxable Income) 2,94,000


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Tax on Rs. 2,94,000 (*) 4,400

Less: Rebate under section 87A (lower of 100% of tax or Rs. 2,000) 2,000

Tax liability after rebate under section 87A 2,400

Add: Education cess @ 2% 48

Add: Secondary and Higher Education cess @ 1%

24

Tax liability before TDS 2,472

Less: Tax deducted at source 1,000

Tax liability after TDS 1,472







However in case of taxpayer, being an Individual resident in India, rebate under section87A of Rs. 2,000 or 100% of tax, whichever is lower, would be provided if his total

income does not exceeds Rs. 5,00,000.

Apart from above, education cess at 2% and secondary and higher education cess at 1%


As per section 208, every person whose estimated tax liability for the year is Rs. 10,000or more, shall pay his tax in advance in the form of advancetax.In this case, the tax

liability amounts to Rs. 1,472 (i.e., less than Rs. 10,000) and, hence, Mr. Raja is not liable

to pay advance tax.Illustration

Compute the amount of advance tax to be paid by Mr. Kapoor (age 35 years) from thefollowing details provided by him (for the year 2014-15):

Taxable business income Rs. 10,84,000.

Interest on debenture Rs. 9,000 (after deduction of tax at source of Rs. 1,000).


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Investment in NSC during the year Rs. 80,000.

He has paid tuition fees of his son of Rs. 1333.

**

Computation of taxable income and tax liability of Mr. Kapoor for the year 2014-15 :

Particulars Rs.

Profits and gains of business or profession

Taxable business income

10,84,000

Income from other source

Debenture interest (Rs. 9,000 net interest + TDS of Rs. 1,000)

10,000

Gross total income 10,94,000

Less: Deduction under section 80C (NSC and tuition fees) 81,333

Total Income (i.e. Taxable Income) 10,12,667

Tax on Rs. 10,12,667 (*) 1,28,800

Less: Rebate under section 87A (lower of 100% of tax or Rs. 2,000) Nil

Tax liability after rebate under section 87A 1,28,800

Add: Education cess @ 2% 2,576

Add: Secondary and Higher Education cess @ 1% 1,238

Tax liability before TDS 1,32,664

Less: Tax deducted at source 1,000


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Tax liability after TDS 1,31,664

(*) The normal tax rates for the financial year 2014-15 applicable to an individual belowthe age of 60 years are as follows:





Apart from above, education cess at 2% and secondary and higher education cess at 1%


As per section 208, every person whose estimated tax liability for the year is Rs. 10,000or more, shall pay his tax in advance, in the form of advancetax.In this case, the tax

liability amounts to Rs. 1,31,664 and, hence, Mr. Kapoor is liable to pay advance tax.

Advance tax is to be paid in different instalments. The due dates for payment of different

instalments of advance tax in case of a non-corporate taxpayer are as follows:


Non-corporate

taxpayers

Nil Up to 30% of

advance tax

Up to 60% of

advance tax

Up to 100% of

advance tax

Considering the above due dates, the advance tax to be paid by Mr. Kapoor on differentdates will be as follows:

His first instalment of advance tax will fall due on 15th September, 2014. His estimatedtax liability for the year is Rs. 1,31,664 (for easy computation, liability is rounded off to

Rs. 1,31,660). By 15th September, he should pay 30% of his liability in advance, hence,

he should pay Rs. 39,498 on account of advance tax by 15th September, 2014.

His second instalment of advance tax will fall due on 15th December, 2014. Hisestimated tax liability for the year is Rs. 1,31,664 which is rounded off to Rs. 1,31,660.

By 15th December he should pay 60% of his tax liability in advance, i.e., Rs. 78,996.

Assuming that he has already paid Rs. 39,498 as advance tax by 15th September, heshould pay balance of Rs. 39,498 on account of advance tax by 15th December, 2014.Thus, total payment of advance tax till 15th December will amount to Rs. 78,996.

His third and final instalment of advance tax will fall due on 15th March, 2015. His

estimated tax liability for the year is Rs. 1,31,664 which is rounded off to Rs. 1,31,660.

By 15th March, he should pay 100% of his liability in advance, i.e., Rs. 1,31,660.


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Assuming that he has already paid Rs. 78,996 as advance tax by 15th December, he

should pay balance of Rs. 52,664 on account of advance tax by 15th March, 2015. Thus,total payment of advance tax till 15th March will amount to Rs. 1,31,660.


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MCQ ON PROVISIONS RELATING TO PAYMENT OF ADVANCE

TAX

Q1. As per section _____________, every person whose estimated tax liability for the

year is Rs. 10,000 or more, shall pay his tax in advance, in the form of advancetax.

(a) 205 (b) 208

(c) 215 (d) 218

Correct answer : (b)

Justification of correct answer :

As per section 208, every person whose estimated tax liability for the year is Rs. 10,000or more, shall pay his tax in advance, in the form of advancetax.

Thus, option (b) is the correct option.

Q2. A resident senior citizen (i.e., an individual of the age of 60 years or above) not

having any income from business or profession is not liable to pay advance tax.

(a) True (b) False

Correct answer : (a)


A resident senior citizen (i.e.,an individual of the age of 60 years or above) not havingany income from business or profession is not liable to pay advance tax.

Thus, the statement given in the question is true and hence, option (a) is the correctoption.

Q3. Non-corporate taxpayers are required to pay up to 30% of advance tax by

___________.

(a) 15th

June (b) 30th

June

(c) 15th

September (d) 30th

September

Correct answer : (c)


Non-corporate taxpayers are required to pay up to 30% of advance tax by 15th

September.

Thus, option (c) is the correct option.

Q4.Corporate taxpayers are required to pay up to _____of advance tax by 15th

June.

(a) 15% (b) 30%

(c) 45% (d) 75%



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Corporate taxpayers are required to pay up to 15% of advance tax by 15th

June.

Thus, option (a) is the correct option.Q5. Taxpayers other than a company, who are required to get their accounts audited,

have to pay tax by physical mode i.e.by depositing the challan at the receiving bank.

(a) True (b) False



Taxpayers other than a company, who are required to get their accounts audited, have to

pay tax through the electronic payment mode using the internet banking facility of the

authorised banks. Any other taxpayer can pay tax either by electronic mode or by

physical mode i.e.by depositing the challan at the receiving bank.Thus, the statement given in the question is false and hence, option (b) is the correct

option.

Q6. While computing the advance tax liability, only TDS/TCS will be deducted,

however, any relief of tax allowed under section 90 or 90A or 91 or any tax credit

allowed to be set off as per section 115JAA or section 115JD will not be deducted.

(a) True (b) False



Tax can be computed on the current income (estimated by the taxpayer) at the rates inforce during the financial year. From the tax so computed, tax deducted or collected at

source will be deducted and the balance tax payable will be used to compute the advancetax liability. Also, relief of tax allowed under section 90 or section 90A or any deduction

under section 91 or any tax credit allowed to be set off as per section 115JAA or section

115JD shall also be deducted while computing the advance tax liability.

Thus, the statement given in the question is false and hence, option (b) is the correctoption.

Q7.The order of the Assessing Officer under section 210(3) requiring the taxpayer to pay

advance tax on his current yearsincome may be passed during the financial year, but not

later than _____________.

(a) 15th

March (b) Last day of January

(c) Last day of February (d) 15th

September

Correct answer : (c)



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If taxpayer fails to pay advance tax (or advance tax paid is lower than the required

amount) and he has already been assessed by way of regular assessment in respect of thetotal income of any previous year then the Assessing Officer may pass an order under

section 210(3) requiring him to pay advance tax on his current yearsincome (specifyingthe amount of instalments in which tax should be paid). Such an order may be passed

during the financial year, but not later than the last day of February.

Thus, option (c) is the correct option.

Q8.After making payment of first/second instalment of advance tax, if there is a change

in the tax liability, then the taxpayer can revise the quantum of advance tax in the

remaining instalment(s) and pay the tax as per revised estimates.

(a) True (b) False


Justification of correct answer :After making payment of first/second instalment of advance tax, if there is a change inthe tax liability, then the taxpayer can revise the quantum of advance tax in the remaining

instalment(s) and pay the tax as per revised estimates.

Thus, the statement given in the question is true and hence, option (a) is the correct

option.

Q9. On receipt of the notice from the Assessing Officer to pay advance tax, if thetaxpayers estimate is lower than the estimate of the Assessing Officer, then he has to

send intimation in Form No.________ to the Assessing Officer.

(a) 35 (b) 34C

(c) 34D (d) 28A

Correct answer : (d)


On receipt of the notice from the Assessing Officer to pay advance tax, if the taxpayers

estimate is lower than the estimate of the Assessing Officer, then the taxpayer can submithis own estimate of current income/advance tax and pay tax accordingly. In such a case,

he has to send intimation in Form No. 28A to the Assessing Officer.

Thus, option (d) is the correct option.

Q10.The order passed by the Assessing Officer to pay advance tax cannot be revised byhim.

(a) True (b) False




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The order passed by the Assessing Officer to pay advance tax can be revised by him

under section 210(4). Such revision can be done, if subsequent to the passing of an orderto pay advance tax but before 1

stMarch of the relevant financial year a return of income

in respect of any later year has been furnished by the taxpayer or any assessment for anylater year has been completed at a higher figure.

Thus, the statement given in the question is false and hence, option (b) is the correctoption.

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31. Provisions on Pymt of Adv. Tax

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